The direct cost associated with salaries and wages and the indirect cost associated with collateral benefits are influenced by both external and internal factors (see Firure 8.2): Because of these influences, direct and indirect costs can become misaligned with the total compensation system. These misalignment fall into three categories: (a) those attributable to the formal structure of salary schedules, (b) those due to the compensation practices of compensation system administrators, and (c) those related to insensitivity to labor market conditions.